Upfront Uproar: CBS Not Budging on Price

Days after Fox set the upfront market by securing low-double-digit CPM increases, one rival broadcaster is sticking to its guns, demanding steeper mark ups for its prime time inventory.

According to one national TV buyer, the initial rates being offered by CBS for its 2011-12 airtime “are well above what the market will bear.” Another agency exec said the network is calling for hikes of 17-18 percent.

After wrapping its upfront business Thursday afternoon, Fox has notched average CPM increases of 11 percent, thanks in large part to its stature among viewers 18-49 and the allure of the new fall series, The X Factor. And while buyers have praised Toby Byrne for his read on the market, some competitors groused that the Fox ad sales president’s going rate will throw the entire upfront out of whack.

If those grapes taste particularly sour––clearly, it’s not Byrne’s responsibility to drive up pricing for the rest of the pool––whatever frustration rival sales exes may be feeling isn’t exactly throwing a damper on their opening salvos.

“CBS is making the argument that they’re in a different market [than Fox] and shouldn’t be hamstrung by that 11 percent number,” said one buyer. “They don’t want to be beholden to the level where Fox set the market…and you can’t really fault them for thinking that way.”

Going out on a high number may have prevented CBS from getting early deals wrapped, but that’s not to say that the network won’t modify its pricing toward a more moderate level. Although the pre-market consensus suggested that CBS would land 14 percent increases, only Jo Ann Ross and Les Moonves know for sure where CBS’ ultimate target price lies.

Well before the broadcasters presented their fall slates to clients, Moonves had been vocal about CBS’ objectives in the spring bazaar. Speaking at the Deutsche Bank Media and Telecom conference in early March, the CBS Corp. president and CEO vowed that his team would land “a substantial increase, or we’ll sell nothing. … We’ll sell it all in scatter.”

(CBS isn’t the only network to press for high-teens price hikes, as Turner Broadcasting is also said to be setting a particularly aggressive course with buyers. Turner’s early overtures have been met with silence.)

CBS closed out the 2010-11 broadcast season ranked No. 1 among total viewers and adults 25-54. It finished behind Fox in the 18-49 demo, averaging a 2.9 rating. While that represents an 8 percent drop from the previous season, it’s worth noting that the 2009-10 ratings reflect CBS’ broadcast of Super Bowl XLIV.

If haggling over price functions is the heartbeat of the upfront process, the actual dollar volume booked is the blood, guts, bones and brains. Before budgets were registered, analysts predicted that upfront commitments could grow as much as 8 percent versus last season’s $8.9 billion take. As it stands now, some observers see broadcast running flat at best.

Days after Fox set the upfront market by securing low-double-digit CPM increases, one rival broadcaster is sticking to its guns, demanding steeper mark ups for its prime time inventory.

According to one national TV buyer, the initial rates being offered by CBS for its 2011-12 airtime “are well above what the market will bear.” Another agency exec said the network is calling for hikes of 17-18 percent.

After wrapping its upfront business Thursday afternoon, Fox has notched average CPM increases of 11 percent, thanks in large part to its stature among viewers 18-49 and the allure of the new fall series, The X Factor. And while buyers have praised Toby Byrne for his read on the market, some competitors groused that the Fox ad sales president’s going rate will throw the entire upfront out of whack.

If those grapes taste particularly sour––clearly, it’s not Byrne’s responsibility to drive up pricing for the rest of the pool––whatever frustration rival sales exes may be feeling isn’t exactly throwing a damper on their opening salvos.

“CBS is making the argument that they’re in a different market [than Fox] and shouldn’t be hamstrung by that 11 percent number,” said one buyer. “They don’t want to be beholden to the level where Fox set the market…and you can’t really fault them for thinking that way.”

Going out on a high number may have prevented CBS from getting early deals wrapped, but that’s not to say that the network won’t modify its pricing toward a more moderate level. Although the pre-market consensus suggested that CBS would land 14 percent increases, only Jo Ann Ross and Les Moonves know for sure where CBS’ ultimate target price lies.

Well before the broadcasters presented their fall slates to clients, Moonves had been vocal about CBS’ objectives in the spring bazaar. Speaking at the Deutsche Bank Media and Telecom conference in early March, the CBS Corp. president and CEO vowed that his team would land “a substantial increase, or we’ll sell nothing. … We’ll sell it all in scatter.”

(CBS isn’t the only network to press for high-teens price hikes, as Turner Broadcasting is also said to be setting a particularly aggressive course with buyers. Turner’s early overtures have been met with silence.)

CBS closed out the 2010-11 broadcast season ranked No. 1 among total viewers and adults 25-54. It finished behind Fox in the 18-49 demo, averaging a 2.9 rating. While that represents an 8 percent drop from the previous season, it’s worth noting that the 2009-10 ratings reflect CBS’ broadcast of Super Bowl XLIV.

If haggling over price functions is the heartbeat of the upfront process, the actual dollar volume booked is the blood, guts, bones and brains. Before budgets were registered, analysts predicted that upfront commitments could grow as much as 8 percent versus last season’s $8.9 billion take. As it stands now, some observers see broadcast running flat at best.

As one buyer noted, cable could be the beneficiary of inflated broadcast pricing. “CPMs have increased more than 30 percent in the last four years. Ratings are down by half in the same period. There’s only so much the client should have to shoulder for lousy performance.”

But such is the nature of the TV market, which reflects the principles of supply-and-demand economics in all its ruthless simplicity. As viewers fall away from the Big Four, they effectively remove supply. The fewer viewers in the demo, the fewer GRPs on offer, which leads to a higher cost to reach the remaining consumers in the sample.

On Wednesday, before Fox issued the white puff of smoke that signals the close of its upfront dealings, many top-tier cable executives were applauding Byrne’s maiden voyage. (A 15-year Fox veteran, Byrne on Jan. 1 succeeded ad sales dean Jon Nesvig; as such, this marked his first stint at the helm of an upfront.)

“I think he did one hell of a read,” said one sales boss. “He got his numbers, he whipped up a lot of business for the new show [The X Factor] and he set the stage for everyone else. Good for him.”

Fox landed a major backer for Simon Cowell’s latest pop confection way back in January, when it signed Pepsi as an official sponsor of The X Factor. The soft drink giant committed an estimated $60 million for the season-long deal.

As Fox gets ready to close the books on the bazaar, ABC continues to plug along, writing CPM increases of at least 10 percent. The CW is also writing business around its unique young female demographic.

Of all the broadcast outlets, NBC presents a far more complex proposition, in that it often bundles its inventory with that of sibling cable properties like USA Network and Bravo. Despite ongoing ratings challenges––NBC finished the season fourth in the 18-49 demo––the Peacock is said to be looking for parity pricing. The cable division will also fight to secure rates for USA Network that are more in keeping with its standing as the No. 1 ad-supported cable net.

Last month, Credit Suisse analyst Spencer Wang projected that NBC would be the lone broadcaster to take in fewer upfront dollars than it did one year ago. Wang forecast a 2 percent decline in NBC’s upfront commitments ($1.57 billion).